FNMA and FMCC preferreds. In search of the elusive 10 bagger.

[Cox022]

This is the first interview where I have heard Calabria bring up a private capital raise as a possibility, along with retained earnings and a public capital raise.

 

Good point, and at multiple times during the interview too.

[orthopa]

Old news but was re watching some old housing hearings.

 

Foster although a dickhead figured out what was going on a long time ago.

 

https://www.c-span.org/video/?c4824072/user-clip-affordable-housing-hearing-10222019-foster-calabria-exchange

 

Mnuchin when asked about conflict of interest noted there is no conflict of interest at treasury. That's because Paulson doesn't work at Treasury LOL!.

 

Calabria seems taken aback and laughs at Foster looking forward to shareholders being wiped out at 4:37. Before that he did a good job acting with body language and a half hearted "we will wipe them out" LOL.

 

We just have to wait for our day. Its coming.

[Guest Covid-19_Survivor]

IT IS COMING

 

Repeated and emphasized

[Guest Covid-19_Survivor]

To Mr. Cherzeca:

 

I've been around a long time, a very long time. As such I'm aware that you have been wrong on damn near 100% of your calls, so, in all due respect, I'd suggest you stop being such a pompous ass and listen to those who don't share your opinions, which, again, have been wrong damn near 1005 of the time.

 

Thank you and have a wonderful day.

[Luke 532]

To Mr. Cherzeca:

 

I've been around a long time, a very long time. As such I'm aware that you have been wrong on damn near 100% of your calls, so, in all due respect, I'd suggest you stop being such a pompous ass and listen to those who don't share your opinions, which, again, have been wrong damn near 1005 of the time.

 

Thank you and have a wonderful day.

 

That is entirely incorrect and uncalled for... Christian Herzeca is one of the most well-respected and most valuable members of this entire community. 

[TonyG]

2nd that. I come here primarily for his opinion

[Guest cherzeca]

so let's say I finally break my losing streak (though I thought I did that with collins) and get seila right...for cause removal unconstitutional (Roberts may add that not being subject to congressional appropriations fits into the equation as well, but no matter, fhfa shares that also with cfpb) and seila is granted relief by having the CID invalidated.

 

I would think GSE stocks go up since that provides a rather straightforward legal path to nuking the NWS.

 

but I wonder if GSE stocks go down since that means Calabria can be removed, and since Biden will be new potus in 2021, the whole release plan is subject to reversal (especially when Biden names Parrott the new fhfa director).

 

now things are not as straightforward as I have just put it, calabria can rope a dope any at will termination attempt in courts, as could calabria continue to have fhfa resist collins in front of 5th C on a GVR, but you get my drift.  my sense is that the market (certainly Gaspo) thinks seila is only about whether calabria continues as fhfa director

 

GSE-land is a strange place to be

[sholland]

2nd that. I come here primarily for his opinion

 

Ditto.

[Guest Covid-19_Survivor]

To Mr. Cherzeca:

 

I've been around a long time, a very long time. As such I'm aware that you have been wrong on damn near 100% of your calls, so, in all due respect, I'd suggest you stop being such a pompous ass and listen to those who don't share your opinions, which, again, have been wrong damn near 1005 of the time.

 

Thank you and have a wonderful day.

 

That is entirely incorrect and uncalled for... Christian Herzeca is one of the most well-respected and most valuable members of this entire community.

 

Whelan's comments to FHFA basically threw Ackman's presentation, which I'd think a lot of us FnF fans use as "the" model for the companies value, under a bus, and Herzeca, per his resume posted on FHFA, should be able to address parts of it. Instead, he ignores it out of hand because Whelan is out to get us, or some such nonsense, and that it differs from his own. That's even with Whelan's comments being pro-FnF, BTW.

 

Think what you want about Whelan but, 1) he's a very bright dude, 2) he raised concerns with those comments (see FnF charts since that pdf dropped). Ignoring them because he is not in our corner is just wrong. And the fact that I attacked Herzeca, and not this group as a whole, shows he has my respect because I'm asking him personally for that opinion. But he doesn't want to address Whelan, the bad guy. He'll address Mr Howard, whose soon-response to FHFA stands an equal chance of being ignored by Calabria, because of the corner he's in. But not Whelan. No, he's on the wrong team.

 

Those blinders have me taking the other side of seila. There's logic to it too but mostly, if Herzeca's for it, it ain't gonna happen.

 

[Luke 532]

 

Whelan's comments to FHFA basically threw Ackman's presentation, which I'd think a lot of us FnF fans use as "the" model for the companies value, under a bus, and Herzeca, per his resume posted on FHFA, should be able to address parts of it. Instead, he ignores it out of hand because Whelan is out to get us, or some such nonsense, and that it differs from his own. That's even with Whelan's comments being pro-FnF, BTW.

 

Think what you want about Whelan but, 1) he's a very bright dude, 2) he raised concerns with those comments (see FnF charts since that pdf dropped). Ignoring them because he is not in our corner is just wrong. And the fact that I attacked Herzeca, and not this group as a whole, shows he has my respect because I'm asking him personally for that opinion. But he doesn't want to address Whelan, the bad guy. He'll address Mr Howard, whose soon-response to FHFA stands an equal chance of being ignored by Calabria, because of the corner he's in. But not Whelan. No, he's on the wrong team.

 

Those blinders have me taking the other side of seila. There's logic to it too but mostly, if Herzeca's for it, it ain't gonna happen.

 

Pro-tip: If you're going to continue talking trash to a well-respected member of the community, at least learn how to spell "Whelan."  You are tarnishing any reputation you may have had each time you post.  Mostly due to the content of your posts, with the cherry on top of not knowing how to spell.

[Guest Covid-19_Survivor]

Whalen? GTFO with that.

 

Ok, last post than. I mean, it's not as if this circlejerk is productive or anything. My 1st post warned of forebearance. This board's response? Nope, not happening (HT: it happened). My last was WHELAN'S pdf. We'll see if it's addressed or not, and how concerning it should have been.

 

You know which opinion will ultimately prove correct here? That law will save us? no. That the administration will? no. The one held by those who admittedly have no idea how the courts will rule and administration will act, and don't care to guess but know it's all so wrong and it will be corrected, and bilked stakeholders will be fully compensated. Emily has a better argument than Cherzeca.

 

[Luke 532]

Ok, last post than then.

You are tarnishing any reputation you may have had each time you post.  Mostly due to the content of your posts, with the cherry on top of not knowing how to spell.

 

 

Emily has a better argument than Cherzeca.

You are tarnishing any reputation you may have had each time you post.  Mostly due to the content of your posts, with the cherry on top of not knowing how to spell.

[Guest cherzeca]

Chris Whalen has a long history re GSEs.  he is a consistent antagonist, but in a sense many of his views are being adopted, though not in the way he would like. 

 

he believes essentially that if you want a housing finance secondary market, it is optimal to have a AAA rating for the GSEs, and in order to get that, you needed a govt guarantee, but the GSEs were a rip off rent seeker since they didn't pay for that govt guarantee, they just benefitted from it because the market believed there was an implicit govt guarantee, and we know this because the market assigned the GSEs a AAA rating.  Hank Paulson was from this school of thinking which is why when 2008 came, he did his best to extract for the govt almost all of the value the GSEs could ever generate in the future.  but that wasn't good enough so when 2012 came, Parrott and the like tried to finish the job and adopted the NWS.

 

now mnuchin is far more sensible, saying that the private capital GSEs can take back over mortgage finance, there is no need for the govt to own it, it just needs to regulate it, and as for that implicit guarantee, no we will change that and make it a paid for line of credit...and calabria has taken it one step further and said we are going to capitalize the GSEs at a level that makes them stand on their own feet...and so with the capital buffers satisfied, maybe that govt line of credit will no longer be needed.

 

the GSE history resembles something of a dramatic narrative, and for Whalen the narrative is going somewhere he doesnt like...away from govt ownership and control of secondary housing finance.  I suspect he gets tribute from banks, and I suspect banks would do very well in a govt owned and controlled secondary housing finance market, since the govt would need banks to implement a govt owned secondary housing market and the banks could then become the rent seekers, but I dont see Whalen's vision returning even if biden is elected.  and if I am wrong, then at least with a release into consent decree phase before any biden inaugural, shareholders will get paid if there ever is a return to the past.

 

as for covid-19_survivor, his analysis may be driven by his portfolio statement, which is like the tail wagging the dog. 

[orthopa]

Calabria on the Cato Institute Daily podcast.  https://www.cato.org/multimedia/cato-daily-podcast/mortgage-markets-covid-19?utm_source=dlvr.it&utm_medium=twitter

 

Nothing groundbreaking but a solid 6-7 minutes of Calabria talking about the GSE's, starting at 19:30.

 

some rough notes, part quote, part paraphrase:

 

-2021/2022 they may do some sort of public offering

-How GSE's raise capital is up to them, I just set the rules and mileposts

-They can either build earnings, sell off assets, or raise public or private capital

-they've hired advisors, it's early, everything is on the table

-we are talking hundreds of billions of dollars at the end of the day that need to be reaised by retained earnings, public or private offerings

-potentially largest public offerings in history and certainly not something done in a short amount of time

-I'm an independent regulator, my term runs to 2024, I have every intention of serving that term

-I hope my successor, because I think I am just carrying out the laws as congress decided it, I'd like to think my successor will take the same perspective

-in my 15 months here the dialogue around this has really changed [to follow the law instead of sticking to conservatorship limbo], and quickly, it's heartening, and I hope that sticks

-I'll add a caveat that it will be very, very difficult to raise capital if we see housing market have a big decline or the equity markets have a big decline

 

I listened to this and enjoyed it. I think a point that I have missed and others maybe when listening to Calabria is that Fannie and Freddie will be raising the money. Based on what we have seen from the Fannie and Freddie CEOs in press releases they want to do this ASAP. Once the recap plans are approved by Calabria its up to FnF how fast the $$$ is raised. The CEOs, MS, and JPM then become aligned to get this done fast as the money coming in will let them.  I think this is important as this will be a transition from being at the mercy of the gov via Treasury/FHFA and the associated delays back to private corporations timelines with shared incentives.

[investorG]

The political tables have turned.  Rather than avoiding pitfalls, Trump needs to swing for victories.  Monetizing the warrants up front for $25-$40bn in a transaction -- along side a large private investment / Collins settlement / 4th amendment -- in advance of the election is advisable.  That money could be targeted for popular non partisan projects at a convenient time.

[Wiggins]

Question for cherzeca or anyone else that has an opinion about this:

 

Is Seila law LLC vs CFPB the fulcrum lawsuit in this whole saga? That is, do you see a favorable ruling there as sending a signal to Mnuchin et al. that the government will ultimately lose and they must implement the recap plan in a manner more favorable to shareholders? And otherwise that an unfavorable ruling there could cause further delay and/or greatly reduce shareholder recovery?

 

It has always been my opinion that the administration wants to recap the GSEs, and the main question is what legacy shareholders will get.  That question is driven by lawsuits and is worth $30 billion (or more). JPM, MS, and new investors will make bank in a recap regardless of what legacy shareholders get. I also think that the default position is to screw anyone and everyone including legacy investors; that's just the way the world works. And yes, I know Paulson & co supported Trump, but still.

 

As an aside, I think it's a mistake for people to continue to opine what Trump's strategy is. He's little more than a useful idiot, and his time may have come. The ruling class will rule regardless of whether Trump is in office. The bright side of this view is that when/if Trump is shown the door, the current trajectory will likely continue.

[Guest cherzeca]

The political tables have turned.  Rather than avoiding pitfalls, Trump needs to swing for victories.  Monetizing the warrants up front for $25-$40bn in a transaction -- along side a large private investment / Collins settlement / 4th amendment -- in advance of the election is advisable.  That money could be targeted for popular non partisan projects at a convenient time.

 

great idea and MS and JPM are just the firms that would have canvassed the most likely investors to determine feasibility and what it would take in connection with their pitches.  but I dont see this happening without at same time first eliminating senior prefs and putting into consent decree...and maybe there will be a few questions re what final capital rule will look like....so I think very likely wont happen before late in year if at all

[Luke 532]

SCOTUS Seila Law: @CFPB survives; for-cause removal provision declared unconstitutional. "The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will." $FNMA $FMCC

[orthopa]

SCOTUS Seila Law: @CFPB survives; for-cause removal provision declared unconstitutional. "The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will." $FNMA $FMCC

 

Shares trading couldnt seem to care less about the decision.

 

Looking forward to the cherzeca interpreation.

[orthopa]

 

BUT interesting nugget here in the majority opinion on FHFA, suggesting that while the two agencies are essentially "companions," FHFA does not regulate private entities. At least not yet.

[investorG]

it seems the backward relief question was remanded.  long time, not resolved before the election. 

 

edit.  the vote to remand for more proceedings to determine any potential backward relief was 7-2. 

[Guest cherzeca]

seila: 5-4 unconstitutionally structured. 5-4 for severance re future relief (as I predicted).

 

backward relief?  the judgment is vacated and remanded. so backward relief is implicit.

 

what was vacated?  ct of appeals judgment that enforced CID.  so backward relief granted.

 

from Roberts opinion:  "Because we find the Director’s removal protection sever- able from the other provisions of Dodd-Frank that establish the CFPB, we remand for the Court of Appeals to consider whether the civil investigative demand was validly ratified."

 

no need to pursue ratification inquiry if the CID has not been invalidated by scotus

[Guest cherzeca]

it seems the backward relief question was remanded.  long time, not resolved before the election. 

 

edit.  the vote to remand for more proceedings to determine any potential backward relief was 7-2.

 

no, this is just wrong imo.  the remand is to determine if CID was ratified.  no need to pursue this remand question re ratification unless the CID relief (invalidation) has necessarily been granted

[investorG]

seila: 5-4 unconstitutionally structured. 5-4 for severance re future relief (as I predicted).

 

backward relief?  the judgment is vacated and remanded. so backward relief is implicit.

 

what was vacated?  ct of appeals judgment that enforced CID.  so backward relief granted.

 

from Roberts opinion:  "Because we find the Director’s removal protection sever- able from the other provisions of Dodd-Frank that establish the CFPB, we remand for the Court of Appeals to consider whether the civil investigative demand was validly ratified."

 

no need to pursue ratification inquiry if the CID has not been invalidated by scotus

 

I read it differently.  There were 2 votes for immediate backward relief, thomas and gorsuch. the other 7 were in roberts' opinion to apply prospective relief and send the retroactive question back to the appeals courts.  Likely you'll disagree, but the stocks do not.

[Guest cherzeca]

seila: 5-4 unconstitutionally structured. 5-4 for severance re future relief (as I predicted).

 

backward relief?  the judgment is vacated and remanded. so backward relief is implicit.

 

what was vacated?  ct of appeals judgment that enforced CID.  so backward relief granted.

 

from Roberts opinion:  "Because we find the Director’s removal protection sever- able from the other provisions of Dodd-Frank that establish the CFPB, we remand for the Court of Appeals to consider whether the civil investigative demand was validly ratified."

 

no need to pursue ratification inquiry if the CID has not been invalidated by scotus

 

I read it differently.  There were 2 votes for immediate backward relief, thomas and gorsuch. the other 7 were in roberts' opinion to apply prospective relief and send the retroactive question back to the appeals courts.  Likely you'll disagree, but the stocks do not.

 

wrong.

 

ratification may or may not be found on remand, but why remand for ratification inquiry if the CID as it stands now has not been invalidated?  invalidated by the court's opinion that vacates judgment.